Pub. 58 2017-2018 Issue 2

37 WINTER 2017 One emergent threat to dealer counts is the “death of geography” that we also mention below, in our section on IT. More and more strong dealerships are using the internet to reach across market boundaries, eroding the geographic barriers that once protected dealers from distant rivals. If this trend accelerates, we may need fewer stores (just as one Amazon can send books anywhere in America). However, the counter- force against this is, again, the need for local servicing (Amazon can ship me a refrigerator, but it can’t easily repair the thing). The equilibrium we might eventually reach is somemixof rural sales- and-service stores, large sell-anywhere- from-anywhere sales-only stores, and suburban service-only locations. If there was no agreement as to how many stores there would be, there was also a lot of divergent thinking about where these stores would be. There was agreement that stores would gradually migrate south and west across the USA, along with the overall population. But on a smaller, local scale there was debate about the rural/suburban/urban mix of stores. Some people thought the rural store was doomed: others saw these mostly-domestic (GM, Ford, FCA) stores as crucial competitive advantages for the Detroit 3, and thus likely to sur- vive 44 (see our Rural Futures chapter). Some thought that with the move back to the cities of some of the population, we would see the return of the true “Main Street” dealership, despite high real estate costs – whereas others pointed out that even if central cities are grow- ing, the suburbs are still growing faster. 45 Once again, we turned to the UBS dealer survey, and asked these deal- ers our question: “What will be the change in dealership count by 2025?” You can see from the exhibit that opinions are divided, but the center of gravity of opinion is for about a 3-5% decrease, which is small enough for us not to be able to draw many conclusions. The importance of scale, urbanization, the rising cost of real estate, and other factors argue for fewer stores – but suburbanization, a growing population, and the arrival of new entrants argue for more. 44 As one interviewee put it: “If there is a Chevy store in a remote town of 20,000 people, you can be pretty sure neither Honda nor Toyota are going to come in to compete with it.” 45 This is correct: Census Bureau data shows that while urban cores have doubled their recent growth rate from about 0.5% per year to 1.0%, and while suburban growth rates have fallen from their recent high of 2.5%, they are still expanding more rapidly, at about 1.5% annually, on average. America continues to suburbanize.  DEALERSHIP OF TOMORROW — CONTINUED FROM PAGE 36  DEALERSHIP OF TOMORROW — CONTINUED ON PAGE 39